Core Research

Our core product that pulls together and explains current global macroeconomic markets. Our work provides actionable insight into the global economy. We are heavy graphics users to illustrate concepts and, in some cases, show the direction of a trend. The MI2 Trader / Chart Point pieces are trade focused complements to MI2 Reports written with a call to action based on current market activity. This piece seeks to take the macroeconomic framework and shed light on certain assets.

MI2 Chart Point: Four Inflation Charts

With risk assets in freefall, this week’s CPI data is more critical than ever. Expectations are for a fall in both the headline and core rates, which conveniently fits the current and pervasive narrative that prices are peaking. While such an outcome would undoubtedly be greeted with relief by markets, we suspect that the greatest sighs will be audible from the core of the FOMC, who in recent months have had to contemplate the possibility of driving the US economy into recession to tame runaway inflation. Given the volatility of all economic data, we usually steer away from forecasting any specific month’s print. However, given the fragility of markets heading into these numbers, we feel compelled to comment.

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Fed: When is Policy Appropriate?

  • Financial Conditions, not rates nor the balance sheet, will dictate when policy is appropriate
  • Currently, monetary policy is at historically easy levels relative to nominal GDP 
  • Conditions need to tighten to slow GDP to sub-trend and reduce job openings by 3mio 
  • Only a significant further decline in equities may be able to deliver that outcome 
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MI2 Chart Point: Two Things to Watch in Japan

As global central banks fight a rearguard action against the assault of resurgent growth and rampant inflation, the BoJ continues to hold the line under the direction of its unmovable Governor, Haruhiko Kuroda. Even for those of you who don’t trade Japan directly, this stance can’t be understated because if the BoJ sneeze, expect global bond markets to catch a cold due to the significance of Japanese capital flows.

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MI2 Chart Point: S&P Sell Signal

As you know, we believe that we stand on the cusp of a biblical rotation in stocks (“Equities: The Last Shall Be First” 15th Feb 2022). Furthermore, at least initially, while the pressure will be centred on US Tech, the move will be decidedly “nasty” in nature, with all assets under varying degrees of downward pressure (“MI2 Chart Point: FAANG Stocks” 25th Jan 2022). Interestingly, despite our clear bearishness, only now are we on the brink of a potential sell signal in the S&P, and if history is any guide, that suggests the move may only be starting.

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MI2 Trader: Fading UK Rates

With inflation skyrocketing, markets are logically questioning the resilience of consumers and how central banks will juggle their mandates without upsetting their political paymasters and the electorate. Front and centre of that debate is the UK, where the currency certainly suggests that the BoE will struggle to achieve this delicate balance.

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MI2 China Update: China reaches a new security deal with the Solomon Islands

  • China reaches a new security deal with the Solomon Islands. U.S. delegations visit the Solomons
  • PBOC keeps benchmark lending rate unchanged
  • Property bust in small Chinese cities rattles households
  • The IMF suggests LME governance needs strengthening
  • Shanghai has a record 39 fatalities from Covid-19
  • Half of Apple suppliers operating in China’s lockdown-hit areas
  • China Says it Will Keep Boosting Strategic Ties with Russia
  • China bristles at U.S. demand not to aid Russian military
  • China has launched a freight train from Xian to Mannheim, which avoids Russia
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MI2 Chart Point: 10 Charts


Since the end of last year, we have highlighted the incongruity of the equity market’s assumption of continued margin growth with transient inflation (“Equities: A Glaring Dilemma” 28th Sept). To our mind, the more likely outcome was either stagflation or continued inflation/reflation. This view  was neatly summed up in a quote we highlighted from the CEO of Restoration Hardware (“The Last Shall be First and the First Last – A Rotation of Biblical Proportions” 13th Apr): 

“I don’t think anybody really understands what’s coming from an inflation point of view because either businesses are going to make a lot less money or they’re going to raise their prices. And I don’t think anybody really understands how high prices are going to go everywhere.” 

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MI2 Trader: CNH Round 2

In the middle of March, we recommended buying USDCNH just below 6.40 and/or 25 delta 3-month Calls with stops below the late Feb / early March lows around 6.30 (“MI2 Trader: CNH”, 14th Mar). The first month was a snoozer as USDCNH flagged and EURCNH and JPYCNH dragged the CNH basket inexorably higher. Nevertheless, both trades are marginally on-side, and we want to revisit the rationale for the trade in the light of recent developments and add further low delta topside to the USDCNH position.

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MI2 Chart Point: JP Morgan a Canary?

Last week, the market was blindsided by a 42% slide in JP Morgan’s profits. In fairness, the collapse was almost exclusively driven by provisioning related to Russia’s invasion of Ukraine. So, in that sense, it was explainable. However, in the flap that followed the release, a rather keen-eyed reader pointed out something potentially much more worrying, which was largely overlooked by the analysts, a material decline in the bank’s CET1 or Common Equity Tier 1. This drop is also mirrored by their peers at Wells Fargo, PNC, Morgan Stanley, Bank of America, etc. Indeed, thus far, only Goldman has bucked the trend, eking out a slight rise. Those boys and girls are sharp!

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